Airwallex CEO & Co-Founder, Jack Zhang: The Angel That Turned $1M into $1BN

1. 0:00 – 1:03

   Intro

   1. JZJack Zhang0:00

      I don't know what is financial discipline. So, I don't have a budget. I'm just like, hire as fast as possible, just blow it all up. (explosion) And then I realize at one point that we running out of money. Every month I'm raising money, basically. So, we went from 0 to a billion dollar transaction volume within, like, nine months. And so we basically never grow below 100% from 2015 to 2023. We went to, like, 500 million dollar AR in August last year, then hit like 600 in November, 700 in January and Feb.

   2. HSHarry Stebbings0:30

      Ready to go? Jack, dude, I'm so excited for this. Listen, we walked around the park and I heard your story, and respectfully I was like, this is such an incredible story that I don't think many people know quite how awesome it is. So, first, thank you so much for joining me.

   3. JZJack Zhang0:59

      Thanks, Harry. It's a, it's a great pleasure to, uh, join this show.

   4. HSHarry Stebbings1:02

      Dude,

2. 1:03 – 11:39

   From Lemon Factory and Petrol Station to Billionaire: The Early Days

   1. HSHarry Stebbings1:03

      I want to start with going... And normally I don't love the whole like, "Oh, take me back to your childhood," 'cause it's normally like, you know, going back to the early days of Stanford. But you started in Australia, and I want to start actually very young, 'cause you started... Was it working in a petrol station? Can you just take me back to the first job and, and that early time?

   2. JZJack Zhang1:24

      I came to Australia when I was, uh, I guess 15-ish. Um, and, and this, you know, I went basically started high school and, um, my family basically lost, um, most of their money and I lost financial support when I was 16. And I had to basically figure it out how to survive, uh, in a foreign country by myself. Uh, and that's why I started, uh, work in a restaurant, uh, work in lemon factory. Um, and-

   3. HSHarry Stebbings1:55

      You worked in a lemon factory?

   4. JZJack Zhang1:57

      Yeah. That's during summer. You know, I, uh, go, uh, basically go take, uh, few hours of train and buses to get on the mountain every day and, uh, to literally carrying lemon, uh, boxes. Um, you know, thousands of lemon boxes a day, uh, under the s- you know, 40 degrees and, uh, for two hours a day without even eating lunch.

   5. HSHarry Stebbings2:19

      How much did they pay you at the lemon factory?

   6. JZJack Zhang2:22

      Uh, they actually pay okay. They pay like 14 bucks, uh, Aussie, an hour. Um, and, uh, because you kind of can work over the 20 hours limit during the holiday, and it's actually a pretty decent income. But it's just a really, really tough job.

   7. HSHarry Stebbings2:38

      Were you nervous/scared? You're 16, 17 at this point, on your own, in a foreign country without financial security. It's a pretty intimidating place to be.

   8. JZJack Zhang2:50

      Well, I guess, uh, just situation that you don't have a, have a choice. Um, you, you know, I left China where I was born and, you know, come to Australia. By that time, I already in Australia for over a year. I couldn't go back to China to do the, uh, exam to the universities, uh, 'cause I would- wouldn't be that competitive anymore. I don't even know how to return to the education system by that time. And literally, you have to figure it out how to, you know, survive and how to pay for the tuitions, um, you know, i- which is very expensive for international students. Uh, I remember it was 24,000 a year. Uh, and then you have to, you know, figure out the, the living expenses, you know, help to, to fund my study. And, um, you know, I have to do my part, just really work as many jobs as possible to figure out how to live on my own.

   9. HSHarry Stebbings3:41

      Fucking nuts. I love that. There's, there's gonna be a great visual that my team's gonna make of a lemon factory and you. (laughs)

   10. JZJack Zhang3:48

       (laughs)

   11. HSHarry Stebbings3:48

       So, what happens there? We are earning 14 bucks an hour in a lemon factory, we're working in restaurants. What's the next step? You go to university? Like, take me to this time.

   12. JZJack Zhang3:58

       Yeah. So, I, I went to, to, to University of Melbourne, um, and that's where I met with my, um, you know, three co-founders. And, uh, I also work, um, you know, different jobs throughout the, the college and I was, uh, work in a restaurant as a dishwasher, um, and I, uh, work in a bar, as, as a, in the Western Hotel as a bartender. Um, I basically work, like, between 4:00 to 11:30, uh, at, in a bar. Uh, and once that's finished, I started work in a petrol station from midnight to 8:00 AM. So, I literally work, uh, 16 hours straight. Uh, and that's, you know, like four, five days a week.

   13. HSHarry Stebbings4:37

       What were you doing in the petrol station?

   14. JZJack Zhang4:39

       That's just doing overnight shift and, uh, sitting there doing, you know, uh, cashing the, (laughs) the, the, the people paying the petrol and selling lollies. And so- (laughs)

   15. HSHarry Stebbings4:50

       (laughs) Selling lollies? That is the most random thing to sell in the petrol station.

   16. JZJack Zhang4:54

       You know, like, you go to petrol station and be like, "Oh, you know, do you wanna just, you know, pay for five bucks for three chocolate?" And, you know, that type of stuff. That's me.

   17. HSHarry Stebbings5:02

       (laughs) Do you know what? I don't actually drive. I don't know if you know this. I haven't passed my test. It's one of my many flaws. And so, petrol stations are not something I know too well. But I, I will go for a lolly. Um, so we're there, we're at Melbourne University at this time, and we've met our three co-founders at this point, correct?

   18. JZJack Zhang5:18

       Uh, I met one out of the three co-founders when I got into University of Melbourne, so in the first year. So, we went to basically the same, um, faculty, and we all started computer science. Uh, and my, my CTO, uh, Jacob, he's like one year, uh, older than me, uh, but like 100 times smarter.

   19. HSHarry Stebbings5:37

       So, you meet him at university, you become friends. Do you start tinkering on ideas together then when you're doing CS together?

   20. JZJack Zhang5:44

       Uh, well, I mean, we spent... I mean, they spent most the time playing Dota and then competing against each other, and I was pretty suck at playing Dota, to be fair.

   21. HSHarry Stebbings5:53

       (laughs)

   22. JZJack Zhang5:53

       Um, and I was literally, you know, like spend most of my time working, um, and little time in, in, in the, in the university to... (laughs) You know, I kind of just try to spend as much as I can. But, you know, I wasn't like the best student in my college, you know, compared to...... my high school, I was like the top, top student of the school, where at university, I was just, like a average student, uh, because I just didn't s- spend enough time to study.

   23. HSHarry Stebbings6:19

       Dude, you're working 16 hours a day. I mean, poor you. There's, university is like this side gig. So, what was the first thing that you started? If I say to you, like your first entrepreneurial thing. What was your first entrepreneurial thing?

   24. JZJack Zhang6:30

       I guess I probably wouldn't call them entrepreneur, but that's the first, uh, sort of taste of, uh, what a success looks like. Uh, so I started g- um, a magazine called, uh, Urban Exploration when I was back in high school, I was like 13, 14, together with the, uh, student in the sort of, I guess, student society. And everyone's obviously working for free. And, uh, you know, we need to raise money for student funding. And I, uh, needed to figure out how to do that. And we were essentially going to the restaurants and, you know, um, computer shops and stuff around the school to raise money, and they were like, "Oh, why don't you just send some flyer out, you know, for us, uh, just for, for, you know, $2, uh, you know, per person, and, you know, we'll give you some money." And, but we kind of, nobody wanted to take flyers, you know. Like, who, who cares? So that we thought we might just write something more interesting and put those ads for those restaurant in the, um, essentially like a magazine or booklet we created, um, and then hopefully that people will be interested to take it. Right? So, but because we write quite interesting stories, like student love stories, how to play like Counter-Strike, uh, and because the school that we were in, uh, of the best schools, and we write really interesting stories, and that magazine just go viral, uh, because we kind of printed out at the school for free and we didn't have any costs and we have very limited, uh, print, and everyone kind of want a copy of it. And, uh, I think over like a year and a half, we got like 8,000 merchants that putting ads on the, on the magazine. And, uh, we actually made decent amount of money. Um, then obviously we kind of donate it to the school. But it, it, it just kind of a massive, um, early success in my, I would say when I grow up.

   25. HSHarry Stebbings8:17

       Yeah.

   26. JZJack Zhang8:17

       You know, before I, I, I came to Australia.

   27. HSHarry Stebbings8:19

       Do you think people are born entrepreneurs or do you think you can become one? When you think back to that as a 13, 14 year old.

   28. JZJack Zhang8:28

       I think when you grow up, um, that if you taste, you know, what success looks like early, you know, whether it's sport, uh, or any type of mass competition, Olympic competition, or any type of competition or any sort of team sports, the tough experience, um, you know, where I kind of lost financial support, and m- when my family kind of lost, uh, most of their money, that really toughen you up. Right? You become quite resilient. And when you're working, you know, 100 hours a week, uh, at this age, and you know, had to go through that mental challenge of, of, of figuring your life out, uh, at such a young age, I think you just become a lot more resilient. And people ask, you know, "Uh, you know, I get burned out. I mean, I'm just, you know, working too hard and, you know, blah, blah, blah." I'm like, "Dude, what, what are you talking about?"

   29. HSHarry Stebbings9:18

       (laughs)

   30. JZJack Zhang9:18

       "You know, d- do you know what is, you know, tough life looks like?"
3. 11:39 – 23:14

   $5M Side Hustle While Working Full-time: How Jack Did It

   1. JZJack Zhang11:39

      So, I was doing a lot of stuff on the side. I was, um, you know, I had a, a, you know, i- importing, exporting businesses for exporting olive oils and wine from Australia.

   2. HSHarry Stebbings11:50

      Sorry, what? You had im- wh- tell me about ...

   3. JZJack Zhang11:52

      Yeah, so I basically exporting olive oil and, uh, and wine of Australia to, you know, uh, China and other countries. And I was importing textiles from China to Australia. Uh, and I had a business of, uh, real estate development. I have a business of, of, uh, architecture, uh, and project management.... uh, and I have all these side businesses that, uh, you know, to be frank, generating millions of income every year, uh, passively. Like, you know, obviously, I, I work full-time. You know, I work pretty hard in my, in my job, and you know, I work another six, seven, eight hours, and I work all the weekends, uh, for my side hustle. And, you know, I, you know, make 200,000 a year on, uh, my full-time job, uh, more or less. And, and I make, you know, two, three, four, five million dollars a year on the other side hustle as kind of that business is getting more mature.

   4. HSHarry Stebbings12:45

      Dude, how the fuck did you do that? (laughs) Two, three, four... I mean, this, that's real money when you are full-time working at AVEVA a- or as an algo trader, and then you're doing an import-export business of olive oil. That's not an easy business to do, is it?

   5. JZJack Zhang13:01

      It's actually pretty easy. You know, you think about it, right? It-

   6. HSHarry Stebbings13:04

      Tell me deeply, dude.

   7. JZJack Zhang13:04

      ... you just, you literally just find a supplier, find a buyer, and you're not a producer, you're not a, you don't need to do any marketing. It's just B2B, right? You just, all you need to do is finding buyers and, and sellers.

   8. HSHarry Stebbings13:15

      And, and you-

   9. JZJack Zhang13:15

      And, you know, I was, at one stage, I was a, you know, a reseller of, of, uh, phone cases, you know? I found like a, a, you know, a, a s- a, a Australian, um, uh, sort of, I guess, uh, manufacturer. Well, not manufacturer, it's more like a brand creator called Quad Lock. Uh, essentially, now it's a private equity-owned business. This actually went pretty big. And I worked with those guys that are designers, and, you know, I helped them to sell, uh, phone cases. And I was making decent amount of money. Um, and, uh, you know, I just have lo- all of these side businesses that are making money. At one stage, you know, come back to the financial insecurity, I probably made like, you know, more than $10 million when I was 28, 29, and I had, uh, you know, financial security. At that time, uh, my real estate business is getting kind of real scale, right? You know, we, we start building like 40, 50 apartments, you know, you know, 40, 50 million Aussie dollar project. Um, you know, I wasn't fully time involved with anything, but that's kind of the direction we-

   10. HSHarry Stebbings14:15

       So you just got people to run them for you?

   11. JZJack Zhang14:17

       Yeah. Uh, and one of the, um, the guys running that for me was my co-founder, uh, Max Li. He's the head of product design. He went become architect, and then started the real estate business with me, uh, started a coffee shop with me, and which, you know, we found the, the foreign exchange, uh, and international payments issue. That's lead us to, to founding Airwallex. But we had financial security at that time. And me and Max was basically just in a coffee shop, and thinking about like, "We cannot doing this for the, you know, just make money for the rest of our life," right? And, you know, we wanted to creating real scale business leveraging technology. You know, I went to college when I see like Facebook took off, right?

   12. HSHarry Stebbings14:59

       Mm-hmm.

   13. JZJack Zhang14:59

       I mean, I don't know if you know, like, we don't use Facebook when we were in college. We were like MySpace, there's like HiFriends, Friendster. Uh, Facebook was not a thing. And, and we just see that shoot off, right? I mean, Google was not even a massive company back then. Uh, and we just saw the, saw the whole internet took off. And especially, like you also saw the internet in China took off, uh, you know, after sort of the early 2000s, right? So the like of, uh, you know, Tencent and, you know, WeChat, and, and Alipay, and, and Alibaba all took off. And you just live in this sort of time that lot of the generational company get created, right?

   14. HSHarry Stebbings15:40

       D- dude, the, the lovely thing for me is I, I knew parts of this story, but I didn't know a lot of this story. B- before we just go to the founding of Airwallex there, you have all of these side businesses. How do you think about the importance of focus? 'Cause when I hear people with lots of side businesses, I'm always like, "Why didn't you just focus on the real estate company? You could've made that 10X bigger." How do you think about the importance of focus versus when it's worth it to have a portfolio?

   15. JZJack Zhang16:05

       'Cause I need to really enjoy and passionate about what I do. And I'm not passion or enjoyed any of these business I started. I always see that just like a business that making money, and I'm, you know, not interested. I, I, obviously, I want a financial security, but making money not gonna make you happy. Well, I wanted to leveraging my engineering skillset to create real, uh, you know, amplified impact at, at scale. And so I starting like probably 10 plus businesses, and, uh, what I really conclude is I don't like any of them.

   16. HSHarry Stebbings16:35

       (laughs) Yeah.

   17. JZJack Zhang16:36

       Um, and I still wanted to pursuing what gonna make me, uh, excited and passionate about, and that's kind of leading to the whole founding story of Airwallex.

   18. HSHarry Stebbings16:44

       What I want to get into that, I, I feel s- sorry for many people today, 'cause I think so many people actually don't find what they truly love. Like, I'm so lucky, honestly, Jack. I found venture when I was 13 years old by watching The Social Network. I- that's how I got exposed to venture. I'm like, "I'm very lucky that I found that," 'cause it's true.

   19. JZJack Zhang17:00

       Well, it took me a decade, right? I started when I was... I mean, if you count in the early days, I mean, more than a decade, right? You started washing dishes, and petrol station, and lemon factory. Then you go from like there to like importer, exporting. You go from trading, you go from like architecture, uh, you know, uh, real estate, and then coffee shop. I mean, you, all that kind of lead to is a bigger idea that, um, that you, you feel passionate about.

   20. HSHarry Stebbings17:27

       So take me to the moment where you found that passion, where you're like, "You know what? I've tried these 10 businesses, but this is the thing that I want to do."

   21. JZJack Zhang17:36

       Um, I always knew I love technology. That's why I keep my code, um, I keep my job of writing code, um, even I'm making 10 times the money on the side. So I never resigned. I never thought about resigning because I need to, I need to, I need to write code every day so I feel that one day when I actually want to start a business, I can still creating something. Um, and the... You know, when we running the coffee business, the idea was not really running a coffee business. The, the initial idea was that, okay, we, we need to basically... I would look at like, you know, in Australia, there's, uh, a, a biggest teleco called Telstra. And they, Telstra publishing the fast 50 growing company every year in Australia. And more than half those companies are retail businesses, like, you know, burger chain or coffee chain, or some sort of this retail chains. And-I started, like, a burger chain and I started, like, a coffee chain. I mean, when I say chain, it's only just really one business at a time, and was supposed to become a chain. Uh, but during that setting up process, the first problem we s- we found is that there's no Square equivalent in sort of 2013.

   22. HSHarry Stebbings18:42

       Mm-hmm.

   23. JZJack Zhang18:42

       Um, and, uh, you know, the whole point of sales, uh, payments, uh, order management, uh, in the back of the kitchen, uh, the ordering system, the delivery system, nothing was really set up. So I was like, "I should start basically a Square." Um, and, and you know, plus the whole kind of backend order management system. And I pitched the idea to my CTO, you know, Jacob, you know like, and I was like, "Dude, like let's do something together. I think this is a real opportunity." At that time also NFC, you know, the touch payment-

   24. HSHarry Stebbings19:14

       Mm-hmm.

   25. JZJack Zhang19:14

       ... started sort of, you know, um, uh, changing the consumer payment behavior. I was like, "Let's build something that can support NFC payments, and let's go in to build this, uh, you know, uh, point of sale system and payment system, uh, for offline merchants." Um, and he's like, "Oh, no, no," like, "I think QR gonna take over the world." I mean, 'cause he, he at the time was started a company in China in AI, uh, and he, you know, it was, he just started the AI business 10 years too early. (laughs)

   26. HSHarry Stebbings19:42

       (laughs)

   27. JZJack Zhang19:42

       And you know, and, uh, uh, and, and he's like, you know, "I don't believe this whole NFC thing." He's like, "QR gonna take over the world. We should build a QR thing." And I was like, "Nobody using QR. I never heard of this thing. I mean, this is like a very China thing, and I don't think so." And we kind of just debated, then we end up just can't agree, uh, on that idea, and then we let it go. I mean, that could be a- a- another billion-dollar startup, you know, in, in 2013. And we'll just keep building the coffee business. And, and then do, like, halfway through and when we launched the coffee business, and we were essentially importing beans from Brazil, from, you know, Indonesia, and you know, importing packages from China, and payment is, is a real issue. And my co-founder's name is, is Max Li, the same name as on the OFAC blacklist. So however that he's sending a payment using his personal name, 'cause at that time, you know, we're still using personal name to sending money around the world. And, uh, and his name, his payment just got blocked somewhere in the middle 'cause it's going through the SWIFT network, and bounced back after two months. Uh, and he just keep complaining to me, you know, like, "Why I'm sending a payment to like a Brazil and take like two months for the payment to come back?" And I really look in- under the hood as like what is this SWIFT thing they built in the 1970s, and how does SWIFT works, right?

   28. HSHarry Stebbings20:59

       Mm-hmm.

   29. JZJack Zhang20:59

       So if you're sending money from, say, NatWest, uh, you know, to, uh, a, a bank in Brazil, like a, a small bank in Brazil that, uh, you know, they're not gonna have a bilateral relationship. Uh, essentially they go through the SWIFT network. There's a lot of intermediaries, the large global banks that have dominated that kind of relationship. So essentially NatWest will go to Barclays, Barclays go to Citi, Citi, Citi go to Itaú, and Itaú go to this smaller bank in Brazil. And it's like everything, the, the smaller the country it is, the l- the more counterparty in the middle get involved, and they charge a higher fee and slow down the process. Uh, and there's a more complicated, uh, compliance process 'cause, you know, the SWIFT messages only contain 140 characters. You can't really put all the information to reduce false positive.

   30. HSHarry Stebbings21:43

       Mm-hmm.
4. 23:14 – 30:22

   Failing Three Times Before Product-Market-Fit

   1. HSHarry Stebbings23:14

      So, so you have the idea, hey, I want to reinvent the SWIFT network, I want to change payments. And at that point, before you build products, you go and raise money?

   2. JZJack Zhang23:23

      Uh, well, there's another funny story. So when I was, uh, um, doing the coffee business, and I was thinking about starting Airwallex at the time. And, um, one day I just finished work on Friday, I went to the coffee shop to, to catch up with Max, uh, you know, another co-founder of, of, of Airwallex. And I said, uh, you know, like, "Let's, you know, res- I'm gonna resign, let's just do this seriously." And I met a girl who is a friend of, of Max, uh, called Lucy, uh, who just resigned from investment, as an investment banker. And, uh, and wanted to get married, and, uh, have a family in Australia. And, um, and I just sort of, you know, hit it off with her. And, uh, you know, she's kind of curious about the coffee business. She's like, "Oh, I wanna, I wanna talk, talk to you more about coffee business, and maybe I can invest in this coffee business." And then like we say, "Oh, let's just grab dinner, right?" So we grab dinner and then she's like, and then, you know, blah, blah, coffee business. I was like, "Actually, you know what? I'm actually gonna really..."... stop, keep investing in this coffee business. I'm gonna start, uh, a new business that really revolutionizing cross border payments, uh, and then fundamentally changing how money move around the world. Uh, and then she's, "Oh, tell me more about it." And, you know, because I- I was like, "Oh, I have a background in FX and, and I'm an engineer. And my co-founder was, uh, like, a genius, uh, engineer." Uh, you know, I made a pitch. Um, and she's like, "How much money you're raising?" I'm like, "Oh, I'll probably gonna raise a million US." Um, and, uh, she's like, "W- what about if I give you 2 million?" You know, this is the girl that you met for the first time in your life, and you only, you know, talked for, like, less than an hour, and then she's, like, offering you $2 million. And it's like, I was like, "For how much of the company?" She's like, "I'll give you $2 million for 40% of the company." Um, and- and I was like, just, you know, initially I was... My reaction was like, "Should I take it serious?" But then she's, uh, uh, "Let's really kind of have a deeper conversation in, uh, law school tomorrow." So law school is the, you know, from University of Melbourne. She's... 'Cause she also went to University of Melbourne. So for all four of us went to the same college. She's like, "Let's meet at, like, 8 o'clock tomorrow, and we will go deep on this." I'm like, "Okay." Um, so and I was, I- I was... I feel that she's serious. So the, we went to the law school on, I remember, Saturday. This is, like, the second day I met her. And she basically, uh, negotiated with me, uh, for three hours. By eleve- 11 o'clock, kind of, we agree that she's gonna invest a million, 'cause I don't want her to own 40% of the company. She's gonna in- uh, invest a million dollar and $5 million post for 20% of the company. And her husband was there, strongly against it. Um, and then she's like, "We're gonna use this money to buy houses, and we're gonna, you know, have a family. You know, what are you doing?" Um, m- she's like, "I'm- I'm keen, and I- I actually wanted to join these guys." And, uh, uh, you know, (laughs) and, uh, she just pushed that through. And we- we just end up agreed, uh, verbally that we're going to do the deal. Uh, the crazy thing is, this is before even I resign from my full-time job in ANZ, um, and this is before I even have a company registered. Then, like, by Monday, I got a mi- text message from my bank account, uh, uh, from my bank, like, which is CBA, is like, "You got a million US dollar wired to your personal bank account." Like, obviously, I give her the bank account. But, like, I just- just didn't expect that she would just wire it without anything signed.

   3. HSHarry Stebbings26:49

      Wow. And so then you put the paperwork in place and...

   4. JZJack Zhang26:52

      Yeah. And, uh, you know, that took, like, months.

   5. HSHarry Stebbings26:55

      Yeah.

   6. JZJack Zhang26:55

      Yeah. So, like, literally, I got the money, um, you know, three days, you know, over the weekend after the first time I met her. And that end up probably one of the best investment people ever made. I mean, this is, like, a- a girl that 20, I don't know, 25 years old or 24?

   7. HSHarry Stebbings27:14

      Dude.

   8. JZJack Zhang27:14

      Um, and never made any investment. It's her first investment, uh, (laughs) went to, you know...

   9. HSHarry Stebbings27:20

      On- on a $9 billion dollar valuation, if you assume a- a reasonable dilution, you're turning a one millionaire into a billion.

   10. JZJack Zhang27:28

       Yeah. I mean, it's- it's crazy. And I kind of just-

   11. HSHarry Stebbings27:32

       I'm gonna give her some advice.

   12. JZJack Zhang27:33

       Yeah. (laughs)

   13. HSHarry Stebbings27:33

       If she's listening. Stop investing. You will never make such a good investment again. You've reached the high. That is insane.

   14. JZJack Zhang27:40

       I- I think she made a few other investments, um, and then didn't turn out to be good afterwards, and I think she stopped investing. (laughs)

   15. HSHarry Stebbings27:47

       That is insane.

   16. JZJack Zhang27:49

       Yeah.

   17. HSHarry Stebbings27:50

       Oh my gosh. Okay. So (laughs) you get a million wired to your personal account, which, uh, it nowadays would be, like, you know, a challenging compliance problem, by the way. Um, but you have a million wired to your account and you get to work? What happens then?

   18. JZJack Zhang28:04

       I resigned. I literally got the money, and, uh, I resigned the same day.

   19. HSHarry Stebbings28:10

       (laughs)

   20. JZJack Zhang28:12

       (laughs)

   21. HSHarry Stebbings28:12

       Dude, I love this. So you resign, you go to Max, and you're like, "Right, let's do this. Let's get to work on Airwallex."

   22. JZJack Zhang28:18

       Yeah. And I... Uh, there's a fifth co-founder, which is Keylock, and I used to work together. I basically, uh, you know, like, kind of force him to resign, 'cause he was, like, got three kids, um, you know, like, lot of obligation. Uh, and he's the be- one of the best engineers I know. Um, and, uh, we worked together in Australia, N- National Australia Bank. And so basically, me, Max, and Wi- and Lucy, we just, like, went to the downstairs of the net building, was like, "We're not gonna leave until you resign. So go resign." And she was stuck there for two hours talking to his manager, which was also my previous manager. And- and I was like, "I know that you're gonna get returned 'cause you're one of the best engineers they ever had, and, um, but dude, we're not gonna leave until you resign. What- whatever that time is. So go- go fucking get resigned."

   23. HSHarry Stebbings29:07

       (laughs)

   24. JZJack Zhang29:08

       And he did.

   25. HSHarry Stebbings29:09

       Deal with your wife later.

   26. JZJack Zhang29:10

       We- we kind of, like, literally forced him to- to resign. (laughs)

   27. HSHarry Stebbings29:14

       I mean, that is nuts. Were you nervous at all about leaving the safety net, going all in on Airwallex? Was there ever a part of you that was like, "Oof, this is, this is real. I'm leaving security"?

   28. JZJack Zhang29:25

       Yeah. I mean, like... And also, like, early days, I also went, went, um, like all in, right? I just, we just live in, like, a, you know, a 10 square meter office. Uh, like, we- we sleep in a sleeping bag, and we're just working there 20 hours a day running code.

   29. HSHarry Stebbings29:42

       You slept in a sleeping bag?

   30. JZJack Zhang29:43

       Yeah. Like, me and Max and Jacob, the three of us, literally, you know. Obviously, kind of hard for Lucy, the girl, to fit in. But, like, you know, three of us, like, we're literally, uh... And then Max, so actually four of us, and we- we would just, like, live in office.
5. 30:22 – 35:28

   The Term Sheet That Got Pulled and Lost Matrix $1BN

   1. JZJack Zhang30:22

      Yeah.

   2. HSHarry Stebbings30:22

      Australian VCs rejected you. So what happens? You go out, you don't have product at this time, but you've got the $1 million from Lucy. And so you're like, "Hey, I'm Jack and I'm doing Airwallex." What happens?

   3. JZJack Zhang30:32

      Yeah. Basically, um, I went out pitching the idea of building a new, uh, foreign exchange and money movement network. Um, and, uh, a lot of people think I'm crazy. Uh, and one of the VCs actually believed in it and actually write a, wanted to write a check and lead the, lead a round. And, um, but, uh, I think one of the founders of the VC, that is Matrix Partners, and, uh, um, they give the term sheet they signed, and, uh, they took it back. Uh, yeah. So they, uh, basically said, uh, I had a call with the founder after they sign a term sheet and, uh, they were like, "Oh, I don't think this algorithm thing gonna work. Uh, and that's not a defensibility anyway." And, uh, yeah, so they basically took it back.

   4. HSHarry Stebbings31:17

      What- what deal did they have on the table?

   5. JZJack Zhang31:19

      Uh, that was $10 million, um, post. So $2 million, $8 million pre.

   6. HSHarry Stebbings31:26

      My god. I mean-

   7. JZJack Zhang31:28

      And I, I literally, like, rejected all the other VCs already by that time, and the only one I haven't rejected, uh, is this, is, you know, Gobi VC from Hong Kong.

   8. HSHarry Stebbings31:38

      I mean-

   9. JZJack Zhang31:38

      And they end up, uh, you know, putting $1 million and plus other smaller VCs that are putting the $2 million together.

   10. HSHarry Stebbings31:44

       That is a billion-dollar pullback.

   11. JZJack Zhang31:46

       Yes.

   12. HSHarry Stebbings31:48

       Oh.

   13. JZJack Zhang31:48

       I mean, they should have closed the deal as they signed term sheet.

   14. HSHarry Stebbings31:51

       Wow, they signed the term sheet?

   15. JZJack Zhang31:52

       Yeah, they signed.

   16. HSHarry Stebbings31:54

       Wow. Yeah, that's appalling. That's bad, bad.

   17. JZJack Zhang31:58

       Yeah.

   18. HSHarry Stebbings31:58

       Um, okay. And so we have-

   19. JZJack Zhang31:59

       And this is, like, one of the most famous VCs in Asia.

   20. HSHarry Stebbings32:02

       Yeah. And the other Australian VC said no?

   21. JZJack Zhang32:06

       Uh, yeah, they didn't even wanted to meet me.

   22. HSHarry Stebbings32:08

       They didn't wanna meet you?

   23. JZJack Zhang32:09

       No. So I didn't even get a meeting. I just got an email. Uh, so funny, both VCs that rejected me now is on Airwallex cap table.

   24. HSHarry Stebbings32:17

       No way.

   25. JZJack Zhang32:18

       Yes, they invested in a $6.2 billion valuation.

   26. HSHarry Stebbings32:21

       Square Pegu and...

   27. JZJack Zhang32:22

       No, so Square Pegu invested in series A+.

   28. HSHarry Stebbings32:24

       Okay.

   29. JZJack Zhang32:25

       Essentially that's, you know, um, saved us from dying. So we, there's like three times that we almost died. And then, um, and that's the second time that we al- almost run out of money. Uh, Square Pegu invested and, uh, but Blackbird and AirTree was the two largest VC in Australia together with, you know, Square Pegu, the, the three biggest VC. Um, yeah, but, but AirTree and, and Blackbird, uh, you know, re- rejected us multiple times, and they now joined, uh, the right, they wrote the largest check, um, at $6.2 billion, uh, ever in the history.

   30. HSHarry Stebbings33:02

       Whoa. So fun fact, John Henderson, who's at AirTree, was the first person to ever believe in me. He introduced me to, like, one of my business partners. He's introduced me to my best friends. Um, so John, I don't think you were probably at AirTree at that point, but...
6. 35:28 – 51:37

   Why We Rejected Stripe’s $1.2BN Acquisition Offer

   1. HSHarry Stebbings35:28

      mentioned Yuri there. Yuri is a, a astonishing man himself. How was that meeting?

   2. JZJack Zhang35:34

      I basically, um, uh, at that time, um, you know, I think I was, um, you know, Sequoia and, and sort of Tencent and, and Mastercard led my series A. Um, and series C, we got, like, because we, uh, we just, you know, rejected, like, acquisition offer from Stripe, um, you know, for close to $1.2 billion, and that was a big thing. And we got term sheet from, like, Hillhouse, from Goldman, uh, wanted to lead the, you know, $1 billion round. And the term was not the best. And, um, and, uh, Neil Shen from, uh, you know, Sequoia China at the time, and, uh, basically don't want me to take the deal, because he's the one that recommended me not to take the Stripe deal. He still said, you know, "You should just make the right decision for yourself and, uh, for the company." And, uh, Neil Shen introduced me to two companies. Uh, he introduced me to John Ling for, from DST, uh, and then he introduced me to, uh, Scott, uh, from Tiger.Um, uh, I think, uh, you know, I had a chat with both and, uh, DSC ended up leading the round.

   3. HSHarry Stebbings36:44

      (laughs) How was the meeting with Yuri? Was it a, was it a cool meeting? You mentioned him asking-

   4. JZJack Zhang36:49

      I think it's a, it's a weird meeting. I mean, imagine you are Series C raised at ab- above a billion dollars and all you really care about is how you grow up. It's kind of weird, right? And they give you a, like literally a verbal term sheet on the spot is also kind of weird.

   5. HSHarry Stebbings37:04

      Again, I, I don't know if it is. When you think about like the tr-

   6. JZJack Zhang37:06

      Like, a billion? I've never ...

   7. HSHarry Stebbings37:07

      The true generational defining companies are founder-led. You know, we have Bailey Gifford on the show, and of their top 10 positions, nine of the best companies in terms of performance are founder-led. If that is the case, 90% of the best performers are founder-led, and we're only here ... Jack, the other thing that you both know, we both know now as investors, a billion dollars does not cut it. 10 billion dollars is what we need for this venture model to work. If that's the case and they're founder-led, I don't, I don't care about your pricing this quarter or your growth this quarter. I care about you. So, I, I, I don't, I, I'm not-

   8. JZJack Zhang37:35

      Yeah, I mean, I just thought it was crazy people were willing to bet on people at that point, that billion-dollar valuation.

   9. HSHarry Stebbings37:41

      Yuri is a legend. Um, so I, I do just wanna go back and take it ch- chronologically 'cause it's such a cool story. (laughs) Okay. So, we, we, ma- the matrix term sheet was pulled and we get some other VCs in. Cool. What happens then? Like, when does first product go out? When do we get product market fit?

   10. JZJack Zhang38:00

       So, the, the, the money we raised from the first three million dollar from Lucy and the other VCs really kind of drying up, that when we try to build this peer-to-peer algorithm, uh, which never gonna work, and we kinda know that. And, and then we were like, "Oh, we need, like basically doing the hard way." We really need plug our FX engine into an interbank liquidity, um, you know, whether the Goldman or GP or, like, um, obviously Goldman or GP not gonna take my calls and, uh, and we, we kinda need to build a ... Getting licenses everywhere around the world, uh, you know, connect to the local clearing infrastructure one by one. You know, it's gonna be, like, a hard, but let- let's say the, the only way we can do it. Uh, and we basically pivoted at that point that, um, we ... It's, I cold called Macquarie. Um, um, and, uh, I, I, I literally, um, 8:00 AM, I remember that I co- cold called a guy and, uh, who took, like, overnight shift in Macquarie to cover the markets 'cause FX is 24/7, uh, 24 by five and a half markets, right? Um, and Tom took the call, um, from Macquarie. He's like a junior guy, can only work on, like, a night shift at a time. And he was about to finish work at 8:00 and he took my call and somehow, I mean, I pitched him, he got, got him excited, uh, and he's willing to invest a whole team of engineers from Macquarie Bank to connect me, um, to the interbank market so that I able to get sub- a, you know, two basis point of liquidity, uh, from a cost point of view. So, I can even build my FX engine by streaming prices and, uh, you know, for first, first couple years our FX price was literally trading back to back to Macquarie. Uh, because normally for the interbank liquidity, you can't trade, you know, sub half a million or a million bucks, right? So that, um, that's how you kinda trade, uh, on, on the interbank. And I able to convince Macquarie to build me a product that you can even trade twen- $20 at a, you know, two basis point cost price.

   11. HSHarry Stebbings39:57

       Wow.

   12. JZJack Zhang39:58

       Uh, and, uh, that cold call worked. I remember even, like, after, um, Series A when we raised $13 million from Sequoia and Tencent and stuff and Mastercard, I went to pitch to Barclays, a- a friend I used to work together. Uh, I met him in Hong Kong, and, uh, I sit in one side of the boardroom, uh, which is like a s- you know, a five-meter-long, you know, table. He went to sit on the other side of the boardroom.

   13. HSHarry Stebbings40:21

       (laughs)

   14. JZJack Zhang40:22

       And I was like, "Dude, what is happening?" And I made a pitch. He's like, "Oh, you know, come to talk to me when you have, like, a billion volume."

   15. HSHarry Stebbings40:31

       That's helpful. (laughs)

   16. JZJack Zhang40:32

       Yeah, that's helpful. I'm like, "Dude, like, uh, I will now ..." You know, Barclays is a great partner, but, you know, we only start working together when I have, like, $10 billion volume or something. You know?

   17. HSHarry Stebbings40:42

       (laughs)

   18. JZJack Zhang40:42

       Uh, and then clearly the, you know ... And that, that Tom, the guy who took my cold call now is the head of distribution, uh, in Macquarie. (laughs)

   19. HSHarry Stebbings40:49

       Uh, phenomenal pick from him. Okay, and so we have that. Do we have product market fit pretty much straight away post that?

   20. JZJack Zhang40:56

       No. Um, and, uh, I got the FX engine builded out and I need, like, a, a bunch of payment rails, so I connect to a bunch of, you know, aggregators initially 'cause I need the coverage, and then I even connect to CurrencyCloud who ultimately become a competitor later. Um, essentially I connect to a bunch of competitors ultimately to get me the coverage that, of the network and, uh, and I, uh, and I have the product going. But in terms of the customer we wanna target to, we initially targeting, like, SMEs in Australia. Um, and the ... We just never really figured out what the product is. We built, like, an invoicing product to allow SME to sell around the world, to get paid through a payment link, um, and then by kind of integrating with a bunch of payment service providers and ... We just never really get product market fit on that pro- It's 'cause the acquisition is too high of SMBs and we never really got product market fit. Uh, at that point, um, uh, we kinda know we needed to raise more money, otherwise we're gonna be dead. So, we basically went to raise money from Sequoia and Tencent.

   21. HSHarry Stebbings41:58

       What was that p- uh, p-

   22. JZJack Zhang41:59

       With a product we, we know is gonna fail.

   23. HSHarry Stebbings42:03

       What happens?

   24. JZJack Zhang42:04

       So basically, I have a product that working, right? I know it's, uh-

   25. HSHarry Stebbings42:08

       (whistles)

   26. JZJack Zhang42:08

       ... not gonna have product market fit. But I ha- I need more money to figure out what the product market fit is. And I basically went to pitch for Sequoia and Tencent and, uh, and, uh, and then one of the idea is actually to pivot it a product to an API product to service in Tencent to kind of power WeChat Pay global settlement. So, you know, when Chinese tourists come to London Airport, they will pay using, uh, WeChat as, you know, uh, and, and, and somebody will settle the merchants doing the FX on the back of that. Uh, and we were thinking we can do a lot better over the Swift network and we can do a lot better than a Tencent Treasury Department. And, um-Um, the idea is to maybe that's an opportunity to pivot and leveraging Tencent's volume to grow the business. Uh, and then knowing that the SME product probably gonna fail, uh, because we haven't ... We only got like 100 customers by that time. Um, and, um, we were raising at, uh, $60 million dollar valuation, uh, with no revenue. Um, and-

   27. HSHarry Stebbings43:07

       But how does that work? You, you, you know that this isn't working, you know that it's not gonna work and you're gonna have to figure it out, and so you, you go to Sequoia and you pitch what? Ideas? Or ...

   28. JZJack Zhang43:18

       Well, I pitched a vision. I pitched the vision of building the largest payment network in the world, alternative to Swift. And that fundamental infrastructure are going to be so important, um, and that's gonna take years to build. Uh, that's why we don't have any revenue.

   29. HSHarry Stebbings43:36

       How did it go? How did the meetings go?

   30. JZJack Zhang43:39

       And then obviously I pitched, uh, Tencent the same time and I, I told Sequoia, Tencent might want to lead the round and kind of play the, you know, the kind of competition game. And, and Sequoia be like, "Yeah, if Tencent's, like, co-leading the round, we're in." But then, like, Tencent did all the IC and everything past IC, um, and, uh, at one point I was super happy this is gonna be done, um, and, uh, the founder of Tencent said, uh, you know, just go through like a normal corporate approval process and the founder of Tencent didn't approve. Uh, after three months process, ICO passed, uh, you know, he just basically is like... 'Cause the, the idea is that this is going to help Tencent to do global, you know, reach out paid settlement, um, and then Pony, the founder, was like, "Why can't we build it ourself internally?" I mean, like, uh, why, like, a 10 people start-up can do a better job than, than us, you know? Like, we have lo- uh, you know, hundreds of, of, of thousands of engineers and, uh, uh, and then the investment team didn't know what to say.
7. 51:37 – 1:15:52

   0-$1B Transaction Volume in 9 Months: How Shein Saved Airwallex

   1. JZJack Zhang51:37

      (laughs)

   2. HSHarry Stebbings51:37

      I mean, that, to be fair though, that is amazing. I mean, like again, suspending disbelief. You're looking back now at a track record of, fuck, the first didn't work, the second didn't work, the third didn't work. But we're still gonna do this. So what happens then? We raise the six million more?

   3. JZJack Zhang51:51

      Yeah. And, uh, and that we able to, uh, sell to other, uh, businesses other than Tencent and Mastercard, like lot of tech companies basically. Um-

   4. HSHarry Stebbings52:01

      And they started adopting.

   5. JZJack Zhang52:01

      They started off. And that we got like a, a few companies that sending tuition payment around the world.

   6. HSHarry Stebbings52:07

      Mm.

   7. JZJack Zhang52:07

      And they are massive, right? So we went from zero to a billion dollar transaction volume within like nine months.

   8. HSHarry Stebbings52:13

      Whoa.

   9. JZJack Zhang52:14

      Uh-

   10. HSHarry Stebbings52:14

       Whoa, whoa, whoa. Pause. What? 2017?

   11. JZJack Zhang52:16

       This is 20, this is January 2018, we onboarded that customer. And 20, and January 2018, we also onboarded Shein.

   12. HSHarry Stebbings52:24

       (laughs)

   13. JZJack Zhang52:24

       (laughs) So, um, and you know, I wish I have invested in Shein at time, but they were like a serious big company. Uh, and I just really just have these two massive customers that I'm riding on top them go global.

   14. HSHarry Stebbings52:39

       Wow. Okay. So you had these two mega unicorns just ripping, and they are driving your zero to a billion?

   15. JZJack Zhang52:45

       Yeah, I remember like one day, Shein basically need to pay suppliers in China, and, um, they give us $20 million. And our, uh, partner in China essentially was the supplier for Shein. And he's basically saying that volume got lost to a customer between two of their customers, right? So from Shein using them directly to using us, and they, we still using them under the hood, right? But obviously, we do the FX and they just do the last mile payment 'cause they have the license in China. We didn't. And, uh, they were like, "No, we're not gonna do it. We literally gonna turn your reels off and we're gonna keep Shein." Uh, and so I basically have 48 hours to integrate with a new partner, uh, that able to pay into China. And otherwise, I was gonna, you know, fuck up my biggest customer, or the only customer (laughs) at that time.

   16. HSHarry Stebbings53:33

       So you call up a new partner and you're like-

   17. JZJack Zhang53:34

       I call a new partner. I was like, "Let's fix out the legal contract later. Let's go live on Sunday night." So we basically start integration on Friday night, worked 48 hours straight, went live on Sunday night.

   18. HSHarry Stebbings53:48

       Jack, this whole conversation has been a continuation of literally me getting goosebumps at you having these like 48 hours to save a Shein contract, which is a lifeblood of the business at that point.

   19. JZJack Zhang53:59

       Yeah. Well, it's kind of 90% of the business at a time. (laughs)

   20. HSHarry Stebbings54:03

       Okay. And so we do the zero to a billion, and now we're like, "We have a real, real business." Correct?

   21. JZJack Zhang54:09

       Yeah. This is like by end of 2018, we have a real business. We have, not a lot, we have probably like 100 customer, but all kind of pretty big customers.

   22. HSHarry Stebbings54:18

       And so then we go out and raise more money?

   23. JZJack Zhang54:20

       Uh, no. Before that, I literally, I started taking off in January. By April, um, and then Tencent and Mastercard, well, Tencent and Sequoia said, "We want to lead another round."

   24. HSHarry Stebbings54:32

       Huh.

   25. JZJack Zhang54:33

       So they basically lead a, a $400, uh, a, a, at a $400 million prey, uh, they invest $80 million. So a 400, $480 million post.

   26. HSHarry Stebbings54:43

       Wow.

   27. JZJack Zhang54:44

       So they basically ... But at that time, the business have no revenue still. Like a very little revenue. But the volume is like doubling, tripling every month.

   28. HSHarry Stebbings54:52

       Did you get the question of commoditization?

   29. JZJack Zhang54:56

       Um, yes, I do. But I think, um, you know, like, I'm just saying-

   30. HSHarry Stebbings55:01

       Some of the greatest fintech investors missed Stripe because they were like, "Oh, it's going to be a race to the bottom on price." And actually-
8. 1:15:52 – 1:19:03

   When COVID Hit, They Lost 50% of Revenue Overnight

   1. HSHarry Stebbings1:15:52

      obviously.

   2. JZJack Zhang1:15:52

      Uh, I mean, 2020, obviously the, during COVID, uh, our revenue went half. So, that's why I wasn't sure whether, whether we were going to close, 'cause like half our revenue is from tuition and, uh, and travel, right? And all this tuition-

   3. HSHarry Stebbings1:16:03

      What's your revenue at that point?

   4. JZJack Zhang1:16:06

      Um, I think 2019 we were like $20 million.

   5. HSHarry Stebbings1:16:13

      2019, you were $20 million. What was the-

   6. JZJack Zhang1:16:14

      I think we were... Let me just think about it again.

Episode duration: 1:35:12